Commercial real estate professionals are cautiously optimistic about the future, in part because of how last-mile delivery demands are reshaping the supply chain, according to recent research by Deloitte.

Gross domestic product growth will likely increase 2.5% in 2017, Deloitte predicts. The modest economic improvement could temper the pace of commercial real estate (CRE) transaction activity, it says. (CRE includes rental apartments, retail and industrial properties, such as warehousing).

“Higher interest rates are likely to increase mortgage costs and could deter real estate investments to some extent,” says Robert T. O’Brien, global real estate sector leader for Deloitte.

He also points out the robust economic growth and job market that follows years of a stop-and-start recovery are good signs. “The improving labor markets and household wealth will likely boost consumer confidence,” O’Brien observes.

Online retailing, on-demand manufacturing, and innovations in speed and mode of delivery (such as same-day delivery and e-lockers) are disrupting the retail and industrial markets, he warns.

He cites the example of retail properties doubling as fulfillment centers. “While retail owners can try different store formats and enhance end-customer experience, industrials should potentially focus on smaller and more flexible spaces within cities to enable faster delivery.”

In the past Deloitte predicted that online retailing, on-demand manufacturing, and faster delivery would disrupt both the retail and industrial markets.

“Demand for large retail and industrial spaces will contract, and there will be a blurring of lines between these two property types,” Deloitte says, citing less demand for large stores and weak overall demand for traditional stores and malls.